debt to income ratio

Definition

DTI. A figure that calculates how much of a person'sincome is spent paying his or her debts. The higher one's debt to income ratio, the more of their monthly income that is solely devoted to paying back debts. DTI is important to manage, because it is something often considered by institutions when they evaluateloancreditworthiness; institutions conclude that if a person's DTI is too high, they might not be able to pay back their debts very easily, and the institution will be less inclined to make the loan. Formula: monthly debts owed divided by monthly income.

Use this term in a sentence

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I had to determine our debt to income ratio, which would determine how much money we had to spend on things.
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